The Power Behind Automobile Ratings

August 13, 1995|By Matt Nauman, Knight-Ridder/Tribune.

After graduating with a master's degree in business administration from the University of Pennsylvania's Wharton School of Finance, Power ventured to Detroit, where he found a town that stifled new ideas and refused to listen to anyone out of step with the rank-and-file bureaucracy. So, after briefly working for Ford and then as a consultant for General Motors, Power moved west. He founded his company in 1968. In the ensuing years, he got what he wanted, and Detroit changed in the process.

Though the company has since begun researching computers, fax machines and airlines, the auto industry remains its primary focus. In 1981, Power began compiling the customer satisfaction index that measured how happy car-buyers were with their vehicles and their dealers in their first year of ownership. By the early '90s, when Power's numbers confirmed that newcomers Acura, Lexus, Infiniti and Saturn were making superior vehicles and treating customers with more respect, he had become the industry's report card.

"If you came in here from Mars and you started assessing the automobile industry, you'd think that he'd probably picked his name or changed his name," John Rock, general manager of GM's Oldsmobile Division, said about the power of Power. "He's become probably one of the most influential names in the business basically because the industry really never had a third-party measuring stick."

The Power surveys and the company's image evolved. From the beginning, Power funded his own research, which set him apart. In the '70s, Power was the first to forecast the growing acceptance of front-wheel-drive cars and problems with Mazda's rotary engines.

That other companies were investing heavily in rotary motorsand subsequently halted those programs and the press verifying Power's findings after Mazda initially denied them, established the company's reputation.

"That was a turning point," Power said. Today, the privately-held company (by Power and 9 or 10 partners) employs 250 people in California, Detroit, Connecticut, Tokyo and Toronto. Sales in 1994 were $28 million, up from $7.5 million in 1987.

By the mid-'80s, car companies began using Power rankings in advertising. Eventually, the practice became so prevalent that Power established rules for using its name in ad copy and hired someone to monitor compliance.

"When you interview in the depth that we interview, you can slice the data every which way," Goodall said.

One company that didn't have to search for superlatives was Lexus, Toyota's luxury division. The company shot to the top of the Power charts soon after it arrived in the U.S. and gained instant credibility. In 1991, Lexus was the first brand to win the top spot in all three of Power's early-buyer surveys.

"It was an important milestone for us," said J. Davis Illingworth, president of Toyota's U.S. sales branch and formerly chief of the Lexus Division.

The impact of Power? "I don't know that I'd use powerful as much as I'd use important," Illingworth said. To him, the value of Power's numbers is that they independently can verify internal company surveys.

Power and Associates surveys about 800,000 car and truck owners annually. For its Initial Quality Survey, for instance, 80,000 to 120,000 eight-page questionnaires are sent to buyers 90 days after they buy a new car or truck. The package includes a cover letter signed by J.D. Power III and a dollar bill to persuade people to complete the survey. Usually, about 38 to 42 percent of people do. From those, Power gets a minimum of 100 owners of each model (and often 200).

The responses are entered into computers at Power's headquarters, and the data is processed. The answers are factored into a complicated formula that ranks satisfaction, as well as what owners consider the most important factors in being satisfied. The results are summarized as an index score.

Power surveys owners from almost as soon as they buy a vehicle to four to five years after the purchase. The company is confident that their surveys reflect satisfaction levels.

Some do question whether the Power surveys are losing their effectiveness. As quality differences have shrunk, so have movements recently in the Power surveys. Lexus, Infiniti and Saturn have finished first, second and third in customer satisfaction study for the last three years, for instance.

"With the difference down to half a defect (per vehicle), it's probably losing some of its impact," said the University of Michigan's Cole.

Los Gatos, Calif., Lincoln-Mercury dealer Harlan McHugh said his customers come carrying Consumer Reports' April car issue, but they rarely mention J.D. Power. "It's more of a dealer measuring device than it is for consumers," McHugh said.

Though market research continues to be Power's bread-and-butter, the company is expanding.

"Research, as time goes on, is getting to be a smaller and smaller portion of what we do," said Glen Pinkus, another partner.